In the US, one car repair, a medical bill or a lost job can cost thousands of dollars at once. Newcomers often have no family nearby to borrow from. An emergency fund is money you keep only for these surprises.
Many financial educators suggest saving enough for 3 to 6 months of basic costs (rent, food, transport, insurance, phone). Start with a smaller goal, like $500 or one month's rent. Workers on a visa may want more, because a job loss also starts a short grace period to find new work.
Savings account: separate from your checking account, so you do not spend it by accident.
High-yield savings account: a savings account, often at an online bank, paying much more interest than a regular one. Compare the APY (the yearly interest rate including compounding).
Money market account: similar to savings, sometimes with checks.
CD (certificate of deposit): you lock money for a set time (for example 6 or 12 months) for a fixed rate. Taking it out early costs a penalty. Better for money you will not need soon.
Keep emergency money in safe places, not in stocks, where it could fall in value right when you need it.
At a bank insured by the FDIC, deposits are protected up to $250,000 per person, per bank, per ownership type if the bank fails.
At a credit union insured by the NCUA, the same $250,000 limit applies.
Check the bank's name at fdic.gov ("BankFind") before opening an account. Some apps are not banks themselves; check which bank holds your money.
Set up an automatic transfer from checking to savings on payday, even $25.
Save part of any tax refund, bonus or gift.
Cancel subscriptions you do not use.
Track spending for one month in your bank app to see where money goes.
TreasuryDirect.gov sells US savings bonds directly. You need a US address and an SSN to open an account. They are safe but you cannot cash most bonds in the first year.
Interest you earn is income. Your bank sends Form 1099-INT if you earn $10 or more in a year. Include it on your tax return.
Keeping all savings in checking and spending it slowly.
Keeping large amounts of cash at home.
Using a credit card as the emergency plan. Interest is high.
Putting emergency money in an app that is not FDIC or NCUA insured.